While liquid alternative assets grew double-digits last year within the wirehouse segment, the asset class has also seemingly hit a wall.
According to the Money Management Institutes latest Distribution of Alternative Investments Through Wirehouses Third Quarter 2012 report, liquid alternative assets grew about 12% from $56 billion in 2011 to an estimated $63 billion. By the third quarter of 2012, the liquid alternatives share of wirehouse assets in alternative investments had grown from 38% in 2011 to 42%, representing roughly 15% of the $391 billion in liquid alternatives held across the industry.
However, alternative mutual fund shops should take heed before celebrating too much. Thats because industry-wide, the emerging liquid alternatives segment is at a crossroads, according to the report. Specifically, the metrics market share, sales growth, size describe a market that, through the third quarter of 2012, had leveled out at just under 4% for the industry and 5% for wirehouses with little growth in market share since 2010. Overall, industry assets associated with traditional mutual funds and ETFs grew much faster than liquid alternative funds during the first nine months of 2012, 18% compared with 11%, respectively, the report said.
Also, through the third quarter of 2012, total net flows into liquid alternative funds were only $2.1 billion, or about $2.8 billion annualized, down significantly from the $5.7 billion in net flows in 2011. Within the liquid alternative market segment, ETF flows during the first three quarters of 2012 edged ahead of mutual fund flows, the result of a shift toward commodity and equity precious metals strategies.